Home prices exploded over the past five years. They're now going up more slowly, but incomes have not kept up.
Housing affordability has improved by one measure, but the average home buyer may not feel the difference.
Americans' incomes are finally growing faster than home prices - but frustrated buyers shut out of the housing market may not notice much of a difference.
When prices for previously owned homes hit a record high of $440,600 in June, Lawrence Yun, chief economist at the National Association of Realtors, said the latest housing data contained a glimmer of positive news.
Despite the new price record, he said, "affordability is better than a year ago because wage growth is outpacing home price growth."
In other words, people's paychecks are now growing faster than home prices.
While that statement is factually correct, it doesn't capture the full picture for the average home buyer trying to enter this housing market.
As one person wrote in response to a LinkedIn post referencing Yun's comment, "I have to challenge the optimism being pushed by Yun here." The commenter, an Albany-based recruiter, said his stepdaughter has a "great job" and is saving money for her first home purchase within the next couple of years.
"Every time she reaches a new milestone, the home price moves the finish line of buying a home even further away," he wrote, adding that there's "a massive disconnect between spreadsheet metrics that mean almost nothing and the reality of the average American household."
Home prices exploded over the past five years. They're been going up more slowly recently, but incomes have still not kept up.
If wages continue to grow faster than home prices for a sustained period, then housing may become more affordable over time.
But comparing home prices and wages leaves out another huge factor that affects housing costs: mortgage rates.
If mortgage rates go down significantly, that could prompt more buying and accelerate price growth. Or wages could get stuck at the current level. It's hard to predict whether external pressures - such as the war in Iran - will be contained or if they will have an impact on wages and home prices.
There's a long way to go before the housing market climbs out of its affordability hole. During the pandemic - a period when many Americans upended their lives and moved to new places where they could work remotely - rock-bottom mortgage rates allowed many people to buy houses. The surge in sales pushed up prices and eroded affordability.
By 2024, a median-priced single-family home had soared to five times the median household income, a near record price-to-income ratio, according to the Harvard University Joint Center for Housing Studies.
We're still digging out of that huge jump in home prices, and even though wages are going up, prices are still going up, too - even if at a slower pace. In other words, people are still paying high prices for houses, even if those prices are no longer jumping by as much.
"People that are in the [real-estate] industry are going to be talking about the rate of change as it relates to the previous month or the previous quarter, but what regular people are experiencing is change that's happened over a few years since the pandemic started, and housing prices went up dramatically and became unaffordable to a whole slew of people in America," Adam Beattie, a mortgage-loan originator in Massachusetts, told MarketWatch.
And even as home prices continue to rise, mortgage rates remain elevated, too. Most people need a mortgage, with only a quarter of buyers paying all cash for homes, according to NAR's sales data.
Higher mortgage rates erase affordability gains in home prices. With the average rate on a 30-year fixed mortgage jumping 11 basis points on Monday to 6.75% amid the latest geopolitical developments in Iran, the cost of a monthly mortgage payment also rose. On Tuesday, the 30-year rate eased slightly, falling to 6.7%.
Expect mortgage rates to stay high as inflation remains a challenge, Beattie said.
The bottom line is that yes, people are earning more and home prices are growing more slowly. Buyers might even find big price cuts in some parts of the country. But even with price cuts, homes are expensive relative to the typical buyer's income, which hasn't changed as much.
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-Aarthi Swaminathan
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July 14, 2026 14:34 ET (18:34 GMT)
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